Prime Wall Avenue analysts like these shares popping out of earnings season

Johnson & Johnson products on a shelf in a store in New York.

Lucas Jackson | Reuters

It was a busy week for Wall Street. Heavyweights like Apple, Microsoft, Facebook, Boeing and Tesla, among others, stepped up to report their earnings for the most recent quarter.

However, some analysts and strategists were more focused on guidance and looking ahead. “As earnings season gets underway and gathers momentum a key factor to Q4 earnings season will be not just how expectations were met, missed, or exceeded in the quarter but how managements of the companies reporting frame the quarters that lie ahead,” Oppenheimer’s John Stoltzfus commented.

With this in mind, one way to find compelling investment opportunities is to follow the activity of the pros that get it right time and time again. TipRanks analyst forecasting service attempts to identify the best-performing analysts on the Street. These are the analysts with the highest success rate and average return per rating.

Here are the best-performing analysts’ top stock picks right now:

Crane Company

Following the company’s fourth quarter earnings release, Canaccord Genuity analyst Ken Herbert continues to view Crane Company’s long-term growth narrative as being strong. As such, the top analyst reiterated a Buy rating on the industrial and engineered products maker. In a further bullish signal, he lifted the price target from $82 to $86.

During the quarter, the company generated revenue of $726 million, reflecting a 21% core decline. That said, free cash flow landed at $88 million for the most recent quarter, or $275 million for the full year, which was $30 million higher than the latest guidance mid-point.

Additionally, Herbert points out that CR “provided bullish comments on the order trends across Q4/20 and is confident in its ability to hit its initial 2021 financial guidance.”

What’s behind the bullish outlook? Strength in the Payment and Merchandising Tech (PMT) segment had a lot to do with management’s optimistic forecast. This strong showing has persisted in 2021, and although the company expects some minor COVID-19-related disruptions, market trends suggest that the disruptions don’t pose a long-term threat.

“We are encouraged by the monthly Q4/20 order cadence, which provides additional confidence in the 2021 outlook for the PMT and FH segments. We believe the strong FCF performance is not fully appreciated by investors, and the strength in the H1/21 Crane Currency business should be a positive catalyst,” Herbert commented.

To this end, Herbert sees CR on the path to generating 2021 and 2022 EPS of $5.05 and $5.75, respectively. “The initial $4.90 to $5.10 EPS guidance is a relatively tight range, but we believe management has very good visibility, and high confidence, on its ability to hit the guidance range, which we believe reflects some justified conservatism,” he noted.

Earning the #84 spot on TipRanks’ ranking, Herbert boasts a 73% success rate and 26.7% average return per rating.

AudioCodes

Despite unforeseen tax and FX headwinds, AudioCodes was able to post estimate beating Q4 2020 results. In addition, the communications software provider issued initial 2021 guidance that also surpassed estimates.

As a result, Needham’s Richard Valera kept a Buy rating and $43 price target on the stock.

“Ongoing strength in Teams/SBC/Contact Center is more than offsetting COVID-driven weakness in Service Provider, driving higher margins, and we think setting the stage for better growth as challenged businesses become a smaller % of revs and/or stabilize,” the analyst explained.

Seeing “exceptionally strong growth in Q4,” the SBC business generated revenue of $95 million in 2020, up from around $60 million in 2019. “Rapid growth of this predominantly software business, has driven steadily increasing product GMs,” Valera said.

While the Service Provider segment made up only 18% of revenue, reflecting a 10% year-over-year drop, this decline is expected to moderate in 2021. IP iPhones are also primed for a rebound in 2021, in Valera’s opinion.  

On top of this, Valera believes MSFT momentum remains strong going into 2021, with similar growth to 2020 expected.

Summing it up, the Needham analyst stated, “We think an accelerated shift to cloud precipitated by COVID-19, and the related explosive growth of MSFT’s Teams, could serve to sustainably accelerate this growth rate. Our recent channel checks suggest accelerating momentum for Teams Voice deployments and a related increase in demand for AUDC SBCs, which we think positions AUDC well for upside in balance of 2020. With shares having underperformed since the company’s June 4th $35 per share follow-on offering, we see an attractive risk/reward for the shares.”

Ranked #117, Valera has achieved a 69% success rate and 22.2% average return per rating.

Johnson & Johnson

In response to Johnson & Johnson’s Q4 print, Morgan Stanley analyst David Lewis raised his price target to $187, from $178. Along with the price target revision, the analyst reiterated his Buy rating on the stock.

Lewis acknowledges that a spike in COVID-19 cases pushed sales to the low end of the company’s previously expected range of -10% to flat, leading to revenue of $6.6 billion for the MD&D segment. This was below the $6.9 billion consensus estimate and reflected an organic 2% decline.

However, the analyst remains very optimistic about the healthcare giant’s long-term prospects.

“We continue to see the Bear Case for Devices as largely eliminated by vaccines, improved hospital protocols, and COVID-19 testing,” Lewis commented.

In 2021, JNJ projects EPS to be between $9.40-$9.60, with sales landing within the range of $90.5 billion-$91.7 billion.

“J&J’s guide today leaves us comfortable that our Large Cap 2021 numbers look risk-adjusted across the balance of the year, as we model ~10% 2021 revenue growth over 2019 (or ~5% per annum, ~2.5 pts below the group’s pre-COVID-19 structural CAGR) and ~flat y/y margins (vs. ~40 bps average annual expansion across the group and >200 bps implied by J&J’s 2021 guide today),” Lewis noted.

Based on his 74% success rate and 18.2% average return per rating, Lewis is ranked #229 out of over 7,000 analysts tracked by TipRanks.

Apple  

Fiscal Q1 saw Apple generate record-breaking revenue. As a result, Canaccord Genuity analyst Michael Walkley left his Buy rating as is, with the analyst also raising the price target from $150 to $155.

The top line result was $111.4 billion, beating Walkley’s estimate and the Street’s forecast by 7%. EPS also impressed, with the $1.68 figure surpassing the consensus and the analyst’s call by 16%.

On top of this, iPhone revenue landed at $65.6 billion, up 17% year-over-year even though the iPhone 12 launch was staggered and it had difficulty meeting the demand for the higher ASP Pro products. Macs and iPads also experienced double-digit growth during the period.

“We believe Apple is well-positioned to benefit from the 5G upgrade cycle and anticipate strong overall growth trends as 5G smartphones ramp and Apple continues to grow its installed base and higher-margins services revenue. Apple’s ecosystem approach, including an installed base that exceeds 1.65 billion devices globally and now over 1 billion iPhone users, should continue to generate strong services revenue,” Walkley stated.

As for the analyst’s long-term expectations, Walkley believes that higher-margin services revenue growth will “outpace total company growth and drive gross margin expansion.”

He added, “With $84 billion in net cash, Apple has a strong balance sheet to continue to invest and support long-term growth. With the 5G upgrade cycle likely a benefit during 2021, other hardware categories growing double digits, and continued mix shift towards high-margin services, we believe the share price is compelling for longer-term investors.”

With a 71% success rate and 29.2% average return per rating, Walkley scores the #54 spot on TipRanks’ list of best-performing analysts.

Facebook

Facebook just got a thumbs up from Oppenheimer analyst Jason Helfstein. In addition to maintaining a Buy rating, the five-star analyst gave the price target a boost, with the figure moving from $345 to $350.

In a report titled “Stellar Q4 Results with Management Taking a Bite at the AAPL,” Helfstein tells clients that the company’s advertising business “continues to benefit from the secular shift to eCommerce/product ads.”

In the fourth quarter, ad revenue grew 31% year-over-year, with the social media company guiding for stable to modestly accelerating year-over-year revenue growth in the first half of 2021. However, management is cautious that Apple’s iOS 14 rollout will create ad targeting headwinds.

“FB management specifically noted iOS 14 changes will impact SMBs’ ability to run targeted ad campaigns, with impact beginning late 1Q. Given comps, we believe revenue impact won’t be visible until 4Q:21,” Helfstein wrote in the research note. The analyst also points out that Facebook is “attacking AAPL’s inherent messaging advantage from iMessage pre-installed on devices, while arguing that iOS 14 policy changes will hurt SMBs.”

Separately, Facebook approved an additional $25 billion in buybacks, with the current authorization now landing at $33.6 billion. It also plans to bring additional digital storefronts to Whatsapp and Messenger.

All of this prompted Helfstein to conclude, “We continue to view stock price as highly attractive at 11x ’22E EBITDA.”

Landing among the top 5 analysts tracked by TipRanks, Helfstein’s calls, on average, generate returns of 45%. He also has a 74% success rate.  

 

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